The Company That Generates $1.19 for Every $1 of Profit

Today, I'm looking at Church & Dwight (CHD).

Here's what caught my attention:

• They control 75% of the world's sodium bicarbonate production

• Their acquisition strategy targets brands P&G considers "too small" - typically $100-500M

• They generate 119% free cash flow conversion (meaning $1.19 cash for every $1 of net income; due to low CapEx and efficient use of working capital)

• ARM & HAMMER extends across 30+ categories by leveraging 178 years of trust

The real lesson isn't about baking soda. It's about consistent execution.

While everyone chases the next unicorn, Church & Dwight quietly:

• Doubles the household penetration of acquired brands within 24 months

• Maintains just 2% capital expenditure (vs 4-5% for competitors)

• Turned Trojan into Gen Z's favorite brand through TikTok (603K followers, 10.4% engagement)

They've also made mistakes worth studying:

• Waterpik lost $23M in sales post-acquisition

• Multiple product recalls damaged trust

• Critics point to aggressive accounting practices

One thing I want to emphasize here is the risk of brand extension.

Brand extension is typically a recipe for trouble. Think Harley Davidson perfume or Colgate frozen dinners, examples of companies that stretched their logos into unrelated categories that violate brand identity. Church & Dwight's ARM & HAMMER defied this pattern by extending the functional benefit (natural cleaning/deodorizing) rather than the brand image.

With that, I'll talk to you tomorrow!

Nick

TL;DR

• What they do: Church & Dwight transformed a 178-year-old baking soda business into a $24B consumer products empire through strategic acquisitions and brand extensions

• Key insight: Counter-positioning against giants like P&G by targeting $100-500M brands that are "too small" for mega-corporations but transformative for CHD

• Entrepreneurial lessons: Dominate a niche before diversifying, leverage heritage brands across categories, maintain financial discipline (119% FCF conversion), and focus on execution over disruption

The 30,000-Foot View

Church & Dwight operates as a diversified consumer products company with four main revenue streams:

• Household Products (42.3%): ARM & HAMMER laundry/cleaning, OxiClean, cat litter

• Personal Care (35.2%): Trojan, Waterpik, TheraBreath, Hero Cosmetics, Batiste

• International (17.5%): Global distribution of core brands

• Specialty Chemicals (5%): Industrial sodium bicarbonate

Key Stats:

• Market Cap: $24.2 billion

• TTM Revenue: $6.11 billion

• Gross Margin: 45.7%

• Operating Income: $1.16 billion

• Employees: ~5,995

• Industry: Household & Personal Products

Company History

• 1846: Dr. Austin Church and John Dwight begin packaging baking soda in New York

• 1867: ARM & HAMMER trademark registered

• 1972: "Open box in refrigerator" campaign increases sales 72% in 3 years

• 1986: DeWitt International acquisition marks entry beyond baking soda

• 2001: Carter-Wallace acquisition brings Trojan, Nair, First Response

• 2006: Orange Glo acquisition adds OxiClean (Billy Mays era)

• 2017-2024: Acquisition spree: Waterpik (2017, $1B), TheraBreath (2021, $580M), Hero Cosmetics (2022, $630M)

• 2025: CEO transition announced; pending Touchland acquisition (2025, up to $880M)

Show Me the Money

Stand-out financial features:

• Small, but consistent, revenue growth w/ expanding margins. Cracks in both showing up in the TTM period though

• 119% FCF conversion

• 29 consecutive years dividend growth

• ROIC exceeds 15%

Financial Data

The N.O.O.B. Nine — Competitive Powers

The Nerd Out on Business Nine is made up of Hamliton Helmer's famous "7 Powers" of competitive advantage (Scale Economies, Network Economies, Counter-Positioning, Switching Costs, Branding, Cornered Resource, and Process Power) combined with two of my own (Data Flywheel and Distribution Advantage).

Average Score: 3.6/5 - Church & Dwight has a formidable competitive advantages through cornered resources, counter-positioning, and brand power that protect against much larger rivals.

Memorable Marketing

Church & Dwight's marketing combines heritage brand power with digital innovation:

1. "More Power to You" Campaign (2019-present)

• Unified messaging across 30+ ARM & HAMMER products

• Multi-channel execution from TV to TikTok

• Result: 4.5% sales growth during economic uncertainty

2. Trojan's TikTok Domination (2021-present)

• Native community managers who "speak TikTok"

• 603K followers, 112M views, 10.4% engagement rate

• Trojan Bareskin Raw sold out on Amazon in 2 hours post-launch

3. Billy Mays OxiClean Era (2000-2009)

• Memorable direct response infomercials

• Sales increased 500% in year one

• Created cultural phenomenon around cleaning products

Tactical Takeaways: • Turn functional products into empowerment stories • Hire platform-native talent for authentic social presence • Use demonstration + personality for direct response success • Align sponsorships with logical use cases (ARM & HAMMER + MLB = dirty uniforms)

AI Uses & Opportunities

Current AI Implementation:

• Creative Optimization: Dynamic adjustment for 6-inch phones to 60-inch TVs

• Audience Targeting: Lookalike modeling improves efficiency by 40%

• Supply Chain: Predictive analytics maintains 99%+ fill rates

• Digital now represents 82% of marketing spend (up from 35% in 2017)

Future AI Applications:

• Voice commerce optimization for the 30% using smart speakers

• AR try-on for personal care products

• Predictive maintenance to reduce already-low CapEx

• Personalized subscription models for consumables

Bumps in the Road

• Failed Integrations: Waterpik sales dropped $23M post-acquisition; Flawless wrote down $200M+

• Quality Control: 2021 Vitafusion recall, 2024 Zicam/Orajel fungal contamination

• Leadership Concerns: CEO's past includes accounting restatements at Alpharma

• Portfolio Challenges: 60% of legacy brands reportedly underperforming

• Valuation Risk: Heavy insider selling at all-time high stock prices

Your Swipe File

Key lessons entrepreneurs can apply:

1. Dominate before diversifying – Control 75% of baking soda before expanding

2. Leverage heritage brands – ARM & HAMMER extends to 30+ categories profitably

3. Counter-position against giants – Target $100-500M brands others ignore

4. Acquire for distribution – Double household penetration within 24 months

5. Maintain capital discipline – 2% CapEx rate, 119% cash conversion

6. Align incentives – 100% of bonuses tied to business results

7. Embrace digital pragmatically – Move from 35% to 82% digital marketing

8. Build on existing behavior – Refrigerator campaign codified what consumers already did

9. Focus on execution over disruption – Consistent singles compound